Eurozone inflation rises to 0.4 per cent in January

The cost of goods and services in the eurozone rose by 0.4 per cent year-on-year in January, according to an estimate released Friday, but analysts warned that the pickup in prices would likely be short-lived.

Fears of deflation have dogged the 19-country European currency bloc, which has also been struggling to rev up its economy after emerging from recession more than two years ago.

Analysts had expected the 0.4-per-cent increase in prices, an initial projection by the EU statistics agency Eurostat showed. It follows a rise of 0.2 per cent in December, when the European Central Bank (ECB) ramped up its efforts to head off a prolonged period of deflation.

The Frankfurt-based lender has an inflation target of just under 2 per cent. Some analysts predicted that it could take further monetary action in March.

"The ECB still has a lot more work to do in order to meet its inflation-targeting objectives on a sustained basis," said Jonathan Loynes of the Capital Economics think tank, warning that the January increase in prices could be "partly reversed" next month.

"The mini inflation recovery ... is likely to come to an end," added Fabio Fois of Barclays Bank. The year-on-year energy inflation figure is expected to take a hit in February, due to a spike in oil prices 12 months ago.

But Teunis Brosens of ING Bank was more optimistic, noting that prices are "moving in the right direction again."

Energy prices fell by 5.3 per cent year-on-year in January, compared to a 5.8-per-cent drop the previous month.

The biggest price increases were seen in services, followed by food, alcohol and tobacco prices and non-energy industrial goods, according to the preliminary data.

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